COMMISSIONER OF CENTRAL EXCISE Vs. ITC LTD.

JUDGEMENT

(1.) M /s ITC Ltd., Pullkeshinagaar, availed Modvat Credit on various inputs and manufactured cut tobacco and cleared the same to their sister unit at Meenakunte for the manufacture of cigarettes. They cleared such cut tobacco during the period 1.3.2000 to 28.2.2001 without payment of duty following Chapter X procedure. A total amount of Rs. 10,73,18,858/ - being the amount chargeable @ 8% of the sale price of such cut tobacco cleared to their sister unit was demanded. The original authority also imposed a penalty of Rs. 10 lakhs. The assessee had used inputs for manufacture of cut tobacco which was cleared on payment of duty to unrelated buyers and also to their sister unit without payment of duty. In the impugned order, the Commissioner (Appeals) set aside the order of original authority. Hence this appeal of the department.

(2.) IN passing the impugned order, the Commissioner had held that to invoke the Rule 57CC, and to demand 8% of the sale price there had to be sale of the final product. In the instant case, the goods had been stock transferred and not sold. He had relied on M/s Ballarpur Industries v. CCE, Nagpur reported in 2001 (138) ELT 94 (Tri.Mumbai) wherein the Tribunal had held that shifting of goods produced in one unit of the assessee to its sister unit for captive consumption in the manufacture of final products did not involve sale and provisions of the then existing Rule 57CC of the Central Excise Rules, 1944 did not apply. The Tribunal had also decided that the assessee did not need to reverse input credit on the intermediate product cleared without payment of duty for manufacture of final products cleared on payment of duty. The department filed the instant appeal on the ground that this decision of the Tribunal relied on by the Commissioner (Appeals) had been challenged in an appeal before the Hon'ble Supreme Court which was admitted in Civil Appeal No. D -2056/2001. As no finality had been reached as regards the issue involved, the appeal sought to vacate the impugned order, for the same being perverse.

(3.) DURING hearing, the learned SDR reiterated the same grounds that the decision relied on by the lower authority had been pending before the Supreme Court in appeal.